The first step is to spend some time daydreaming â yes, daydreaming â about what you picture yourself doing in your retirement years.

By Janel Leymeister, Special to PennLive

Ask most people what they would do if they won the lottery and they’ll rattle off dreams they would make a reality. But ask people what they plan to do in retirement and they’ll often draw a blank. Sometimes people tell me they’re just going to keep working, because they don’t know what else to do.

It’s human nature to live in the moment. It’s much easier to focus on what you’ve got planned for today than it is to think about what you’re going to be doing 10 or 20 years down the road.

But while your chances of winning the lottery are pretty slim, you hopefully will get the chance to retire. And if you want to enjoy your golden years, you owe it to yourself to think about how you’d like to spend them so you can start planning now to make your vision a reality.

The first step is to spend some time daydreaming – yes, daydreaming – about what you picture yourself doing in your retirement years. Many people want to travel to exotic places. Your plan might be as simple as reading more books, experimenting in the kitchen, or spending more time golfing.

Grab a pencil and paper and jot down ideas as a starting point. Talk with your partner and friends. Read magazines or go online to get ideas. You should have fun with this process, which might take some tweaking.

The daydreaming part should be easy, but then things start to get a little harder. You’ll need a realistic understanding of what your plans cost, if they cost anything, so you can assign a dollar value to them. Start with the fun stuff, like golf and travel. How often do you want to take a big trip or hit the links? What will that cost, roughly?

Next you’ll need to calculate basic living expenses. There are great budgeting tools out there – apps, online calculators, etc. – to help you identify and tally expenditures, including rent or mortgage payments, car payments, insurance, groceries and utilities. Add these expenses to your “fun” expenses to get an idea of how much you’ll need annually.

Based on the annual expense you’ve arrived at, we need to figure out how big of a nest egg you’ll need in order to accommodate your plans. Two factors come into play here. The first is roughly how long you need the money to last, which will vary depending on how soon you plan to retire. The second is investment performance on your nest egg. While there are no guarantees, it’s generally agreed that with a middle-of-the-road investment approach – approximately 50 percent invested in bonds and 50 percent in stocks – you can withdraw three to five percent of your savings each year and you’ll have a good chance your nest egg will last 30 years.

For example, let’s say you’ve determined you need $50,000 annually, and that you plan to retire at 65 and need your money to last 30 years. Assuming you plan to invest half of your nest egg in bonds and half in stocks, it is generally accepted that you could withdraw 4 percent each year for 30 years with a good chance you would not run out of savings.

Now you will need a calculator. If you take your anticipated annual expenses of $50,000 and divide it by 4 percent, you will get $1.25 million. This is the amount you would have to amass for retirement. This is assuming you’ll have no income from a pension or Social Security.

That might be a shocking number at first glance, but it’s not as hard to reach as you might think. In our next article, we will show you just what you need to do to get there. In the meantime, start dreaming!

Janel Leymeister is a partner and benefit consultant with Harrisburg-based Conrad Siegel Actuaries (www.conradsiegel.com, 717-652-5633). She specializes in providing consulting for all types of defined contribution retirement plans.

The opinions expressed in this column are solely the writer’s and do not reflect the opinions of The Patriot-News. Before acting on any financial advice, readers should consider whether it is suitable for their circumstance and consider seeking advice from a financial or investment adviser. Â

The opinions expressed in this column are solely the writer’s and do not reflect the opinions of PennLive.com or The Patriot-News.

Before acting on any financial advice, readers should consider whether it is suitable for their circumstance and consider seeking advice from a financial or investment adviser.Â

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